Forfeiture clause (Art. 2348 French Civil Code): taking the secured asset without a forced sale

A debtor stops paying. The bank or fund that financed the transaction holds a pledge over industrial equipment, a pledge over a securities account or a mortgage. The operational question is not whether the security exists, but in how many weeks it produces value, and what is left of it if collective proceedings open in the meantime. The forfeiture clause (pacte commissoire) under Article 2348 of the French Civil Code allows the creditor to become owner of the pledged asset without a forced sale, and therefore without enforcement proceedings or competition at the stage of distribution of the proceeds. From the standpoint of the institutional creditor, this guide examines when to include the clause, what it really gains in time, what it does not gain in ranking, and at what precise moment the opening of collective proceedings neutralises it.

What Article 2348 of the French Civil Code exactly allows

The text is short and entirely operational. In its wording resulting from Ordinance No. 2021-1192 of 15 September 2021, in force since 1 January 2022:

It may be agreed, at the time the pledge is created or afterwards, that if the secured obligation is not performed the creditor will become owner of the pledged asset. The value of the asset is determined on the day of the transfer by an expert appointed by agreement or by the court, failing an official quotation of the asset on a trading platform within the meaning of the Monetary and Financial Code. Any clause to the contrary is deemed unwritten. Where that value exceeds the amount of the secured debt, a sum equal to the difference is paid to the grantor or, if there are other pledgees, is deposited with a third party.

Four points deserve the attention of the person drafting the contract.

The clause may be agreed at the time the pledge is created or afterwards. A creditor that took a pledge without a forfeiture clause can therefore add one by amendment, including at a stage when the relationship is deteriorating, subject to the limits arising from the opening of collective proceedings and the rules on acts carried out as cessation of payments approaches, which call for their own analysis. The regime of voidness during the suspect period, and what a creditor that has been paid or secured may lose retroactively, is set out in our dedicated article.

Valuation is mandatory and adversarial. The value is determined on the day of the transfer, by an expert appointed by agreement or by the court. The 2021 ordinance narrowed the exemption from expert valuation: it now applies only failing an official quotation of the asset on a trading platform within the meaning of the Monetary and Financial Code, a formula that replaces the former reference to the regulated market. In practice, the exemption from expert valuation now concerns only listed assets, and not equipment, stock or securities not admitted to such a platform.

The sanction for a clause to the contrary is ineffectiveness. Any clause to the contrary is deemed unwritten. A clause that fixed the value of the asset as a lump sum, capped the valuation or excluded the expert's involvement has no effect on that point. A creditor that tries to lock in the valuation by contract gains nothing more, and weakens the whole mechanism.

Finally, the surplus is now returned to the grantor, and not to the debtor. The distinction matters in structures where a third party pledges an asset to secure another person's debt: the excess value goes to that third-party grantor. If there are other pledgees, the difference is not paid over but deposited with a third party.

Three ways of enforcing: sale, court award, forfeiture clause

An unpaid pledgee has three options, which must be compared on timing, cost and control of the asset.

Sale falls under Article 2346. Since the 2021 ordinance, the text states that the creditor may proceed with the sale of the pledged asset, and no longer that it must have the sale ordered by a court. The sale takes place according to the procedures of the Code of Civil Enforcement Procedures, without the pledge agreement being able to derogate from them. The same article opens, where the pledge secures a professional debt, a markedly faster route: public sale by a notary, a commissaire de justice (bailiff), a judicial auctioneer (commissaire-priseur judiciaire) or a sworn commodity broker, eight days after simple service of notice on the debtor and, where applicable, on the third-party grantor of the pledge. That is the relevant point of comparison for professional financing, and it puts into perspective the argument of speed often put forward in favour of the forfeiture clause.

Court award appears in Article 2347: the creditor may also have the court order that the asset remains with it in payment, with the same rule of payment of the surplus to the grantor or deposit with a third party. It requires an application to the judge, and therefore delay and procedural uncertainty, but it produces a judicial title to ownership of the asset, which reduces the risk of later challenge.

The forfeiture clause is the purely contractual route. Its advantage lies in the absence of any prior application to the judge and the absence of a sale: the creditor keeps the asset, which matters where the pledged asset is a production tool, a securities portfolio or an asset whose forced-sale value would be far lower than its value in use. Its cost lies in the expert valuation and in the obligation to pay over or deposit the balance (soulte).

A well-informed institutional creditor does not choose a route when signing the contract: it includes the forfeiture clause in order to have an additional option, and chooses at the time of default between appropriation, accelerated sale and court award, depending on the nature of the asset, the existence of other registered creditors and the debtor's financial condition.

What the forfeiture clause gains, and what it does not create

The gain is twofold. First, a gain in time: Article 2348 requires no prior court authorisation, whereas court award requires a decision. Second, a gain in control: the creditor avoids the mechanics of distribution of the proceeds, where it must assert its ranking against the other registered creditors and preferential creditors.

The point not to be confused is ranking. The forfeiture clause does nothing to improve the creditor's position in the order of security. Ranking results from the enforceability of the security against third parties, and Article 2337 sets the rule: the pledge is enforceable against third parties by the publicity given to it, and also by dispossession, into the hands of the creditor or of an agreed third party, of the asset which is its subject or of the document which, like a bill of lading, represents it. Where the pledge has been properly published, the successors by particular title of the grantor may not rely on Article 2276.

Article 2340 completes the scheme: between several successive pledges without dispossession, the ranking of the creditors is determined by the order of their registration; and where an asset pledged without dispossession is subsequently made the subject of a pledge with dispossession, the preferential right of the earlier, properly published creditor is enforceable against the later pledgee, notwithstanding the latter's right of retention.

The practical consequence is clear. A forfeiture clause included in an unpublished pledge not accompanied by dispossession is a paper clause as against third parties. The institutional creditor's priority is therefore registration, within the time limits, with the collateral properly described; the forfeiture clause is merely an accelerator for enforcing security whose ranking already exists.

The situation in which another creditor has already levied an attachment on the asset must also be reserved. The interplay between the vesting effect of the attachment and the operation of the clause falls under the Code of Civil Enforcement Procedures and calls for case-by-case analysis before any appropriation.

Beyond the pledge: pledges of intangibles, securities accounts, mortgages, fiducie

Contractual appropriation is not confined to the pledge of tangible movables.

For pledges of intangible movables other than receivables, Article 2355 refers, failing special provisions, to the rules provided for the pledge of tangible movables, with the exception of 4° of Article 2286. Articles 2347 and 2348 therefore apply, but the pledgee does not benefit from the right of retention attached to a pledge without dispossession, an exclusion added by the 2021 ordinance.

For the pledge of receivables, Article 2365 offers a contractual equivalent that has remained unchanged since 2006: if the debtor defaults, the pledgee may have the pledged receivable and all the rights attached to it awarded to it, by the court or under the conditions provided for by the agreement. It may also wait for the pledged receivable to fall due. For a lender, this wording is one of the most favourable in the law of security: contractual award is permitted there without the valuation formalities of Article 2348. The effects of the pledge of receivables in the debtor's collective proceedings are analysed in a separate study devoted to that security.

For the pledge of a securities account, Article L. 211-20, V of the Monetary and Financial Code provides for enforcement eight days after formal notice, or on expiry of any other period previously agreed, for securities admitted to a trading platform, units or shares of collective investment undertakings and sums in any currency. For other financial instruments, enforcement takes place by public sale, the text specifying that the creditor may also apply for court award of the pledged securities or agree on their appropriation in accordance with Articles 2347 and 2348 of the Civil Code.

In mortgage matters, the numbering has changed and the error is frequent in contract templates predating 2022. The property forfeiture clause now appears in Article 2452: it may be agreed in the mortgage agreement that the creditor will become owner of the mortgaged property, the clause being without effect on property that constitutes the debtor's main residence. Court award appears in Article 2451, which allows the mortgagee to apply to the court for the property, if it does not constitute the grantor's main residence, to remain with it in payment. The difference in wording deserves to be noted: Article 2452 refers to the debtor's main residence, Article 2451 to that of the grantor. In a structure where a third party mortgages their home to secure a company's debt, the two texts do not mechanically produce the same result.

Finally, security by way of fiducie (trust-type transfer) is a structural alternative. Article 2372-3 provides that, failing payment and unless otherwise stipulated, the creditor-fiduciary acquires free disposal of the asset or right transferred as security, the value being determined by an expert unless it results from an official quotation on a trading platform within the meaning of the Monetary and Financial Code or the asset is a sum of money, any clause to the contrary being deemed unwritten.

Mandatory exclusions to check before including the clause

Two prohibitions close the route of the forfeiture clause, however well the contract is drafted.

In consumer credit, Article L. 312-38 of the Consumer Code is categorical: if the borrower defaults, only the methods of enforcing a pledge authorised by Articles 2346 and 2347 of the Civil Code are open to pledgees, to the exclusion of the forfeiture clause provided for in Article 2348 of the same code, which is deemed unwritten. The lender keeps sale and court award, but not contractual appropriation.

In mortgage matters, the clause under Article 2452 has no effect on property constituting the debtor's main residence. For a lender backed by a residential asset occupied by the debtor, the forfeiture clause produces no result and the strategy must shift to enforcement against the property.

The shock of collective proceedings: the real limit of the mechanism

This is where the institutional creditor's choice is decided, and where the forfeiture clause reveals its fragility.

Safeguard and court-supervised reorganisation: conclusion and enforcement paralysed

Article L. 622-7, I of the French Commercial Code, in its wording resulting from Ordinance No. 2021-1193 of 15 September 2021, in force since 1 October 2021, states at the end that the opening judgment lastly prevents the conclusion and enforcement of a forfeiture clause. Both verbs matter. It is not only forbidden to operate an existing clause: it is forbidden to conclude one after the opening judgment. The same paragraph makes the right of retention conferred by 4° of Article 2286 of the Civil Code unenforceable by operation of law during the observation period and the performance of the plan, unless the pledged asset is included in a transfer of the business ordered under Article L. 626-1. On the place of the right of retention under Article 2286 in collective proceedings, see our analysis of that mechanism.

Article L. 631-14 makes Articles L. 622-3 to L. 622-9 applicable to court-supervised reorganisation. The paralysis therefore extends to that procedure.

The sanction appears in III of Article L. 622-7: any act or payment made in breach of the provisions of this article is annulled at the request of any interested person or of the public prosecutor, made within three years of the conclusion of the act or of payment of the claim, the period running from publication where the act is subject to it. An appropriation carried out in breach of the text therefore exposes the creditor to restitution for three years, with the accounting and prudential consequences that this implies for an institution that has already brought the asset onto its balance sheet.

Two effects of the opening judgment must be added. II of Article L. 622-21 stops or prohibits any enforcement procedure on movables and immovables alike and any distribution procedure that had not produced a vesting effect before the opening judgment. The pledgee therefore cannot fall back on the sale under Article 2346 during the observation period either. And IV of the same article, resulting from the 2021 ordinance, prohibits by operation of law any increase in the collateral of a contractual security interest in rem or of a contractual right of retention, by whatever means, by the addition or supplementing of assets or rights, in particular by registering securities supplementing those in the pledged account. Top-up clauses and mechanisms for automatically rebuilding the collateral cease to have effect on the day of the judgment.

Compulsory liquidation: a literal cross-reference that leaves an area of debate

The answer is less clear-cut than it is sometimes read. Article L. 641-3 provides that the judgment opening compulsory liquidation has the same effects as those provided for in safeguard proceedings by the first and third paragraphs of I and by III of Article L. 622-7, by Articles L. 622-21 and L. 622-22, by the first sentence of Article L. 622-28 and by Article L. 622-30. Yet the sentence prohibiting the conclusion and enforcement of the forfeiture clause appears in I of Article L. 622-7, after the one concerning the unenforceability of the right of retention under a pledge without dispossession.

The exact scope of the cross-reference therefore depends on how I of Article L. 622-7 is divided into paragraphs and on the reading adopted by legal commentators and the courts. To state without qualification that the forfeiture clause is prohibited in compulsory liquidation, or on the contrary that it remains workable there, would be unwise. For an institutional creditor, the operational consequence is simple: do not build a recovery strategy in liquidation on the sole operation of a forfeiture clause, whose effectiveness is debated, and favour the tool whose use the text expressly organises.

In liquidation, the workable tool remains court award

Article L. 642-20-1 sets out a timetable that the creditor must follow to the letter. Failing withdrawal of the pledge or of the thing lawfully retained under the conditions of the second paragraph of Article L. 641-3, the liquidator must, within six months of the compulsory liquidation judgment, apply to the supervising judge (juge-commissaire) for authorisation to proceed with enforcement. The liquidator notifies the authorisation to the creditor fifteen days before enforcement. And above all: the pledgee, even if not yet admitted, may apply to the supervising judge, before enforcement, for court award. If the claim is rejected in whole or in part, it returns the asset or its value to the liquidator, subject to the admitted amount of its claim. In the event of a sale by the liquidator, the right of retention is transferred by operation of law to the price.

Two time limits are therefore fatal in practice: the fifteen-day window between notification of the authorisation and enforcement, which is the last useful moment to apply for court award, and, more broadly, vigilance over the six months following the judgment. A pledgee that lets the notification pass without reacting loses the asset and finds itself competing for the price.

The only appropriation that withstands collective proceedings: Article L. 211-38 of the Monetary and Financial Code

For an institutional creditor, there is a route that expressly escapes the collective discipline: financial collateral arrangements. Article L. 211-38 of the Monetary and Financial Code, in the version in force since 1 July 2026 resulting from Law No. 2025-391 of 30 April 2025, allows the parties to provide, as security for the financial obligations referred to in Article L. 211-36, for transfers of full ownership enforceable against third parties without formalities of financial instruments, goods represented by a warehouse receipt, bills, receivables, contracts, crypto-assets or sums of money, or the creation of security over such assets or rights, capable of being enforced even where one of the parties is subject to one of the proceedings provided for by Book VI of the Commercial Code, or to an equivalent foreign proceeding, or to civil enforcement proceedings or the exercise of a right of opposition.

The text specifies that enforcement of such collateral takes place on normal market terms, by set-off, appropriation or sale, without prior formal notice, according to the valuation methods agreed by the parties once the financial obligations covered have fallen due. The 2026 version replaces the notion of digital assets with that of crypto-assets.

The gap with Article 2348 is considerable. Where the ordinary-law forfeiture clause runs up against the opening judgment, financial collateral can be enforced by appropriation despite it, without formal notice and according to the agreed valuation methods. For a lender or a market counterparty, the question of structuring therefore comes before that of drafting: where the asset and the secured obligation fall within the scope of Article L. 211-36, financial collateral prevails over the ordinary-law pledge with a forfeiture clause.

Drafting and implementing: points of vigilance

A few drafting reflexes are needed for an institutional creditor.

• First check the enforceability of the security itself against third parties: publicity or dispossession within the meaning of Article 2337, dated registration, collateral described precisely.
• Include the clause from the outset, bearing in mind the option under Article 2348 of agreeing it afterwards if the existing pledge does not contain one.
• Organise the appointment of the expert, by agreement in the first place, with a mechanism for court appointment failing agreement, never attempting to fix the value as a lump sum or to exclude the expert valuation: a clause to the contrary is deemed unwritten.
• Anticipate the balance (soulte): provide for the route by which it is paid to the grantor and, where there are other pledgees, the deposit mechanism.
• Map competing registrations before any appropriation, the order of registrations governing the preferential right under Article 2340.
• Identify the assets that may fall within the financial collateral regime, so as to move them into it rather than leave them under an ordinary-law pledge.

Several questions are settled by no text and must be dealt with cautiously by contract: whether a prior formal notice is required, the precise date of transfer of ownership, and the fate of the asset if the claim or the valuation is challenged. Article 2348 imposes no express formality, which does not mean that a notification is pointless; on the contrary, it is recommended in order to date the transfer, the reference point for the valuation.

Conclusion

The forfeiture clause is a good tool, but not the one people think it is. It creates no ranking, takes priority over no previously registered creditor and does not survive, in safeguard and court-supervised reorganisation, the opening judgment, which prevents both its conclusion and its enforcement, on pain of nullity for three years. Its real usefulness lies outside collective proceedings, on assets whose value in use clearly exceeds their forced-sale value, and where the creditor wants to avoid distribution of the proceeds. Compared with the eight-day public sale under Article 2346 for a professional debt, its advantage in timing is more modest than it is made out to be.

The strategic consequence is twofold. For financial assets and obligations falling within the scope of Article L. 211-36 of the Monetary and Financial Code, structure as financial collateral: it is the only appropriation that the text declares capable of being enforced despite the opening of a Book VI proceeding. For all the others, include the forfeiture clause as a complementary option, never as a pillar, and put in place from signing a system for monitoring the debtor's situation: the value of the forfeiture clause depends entirely on the window before the opening judgment.

Frequently asked questions

Can a forfeiture clause be added after the pledge agreement is signed? Yes. Article 2348 of the French Civil Code expressly provides that it may be agreed at the time the pledge is created or afterwards. An amendment is therefore possible on an existing pledge. That option disappears, however, after the opening of safeguard or court-supervised reorganisation proceedings, the opening judgment preventing both the conclusion and the enforcement of the clause under Article L. 622-7, I of the French Commercial Code. An amendment concluded as cessation of payments approaches also calls for specific analysis.

Can the value of the asset be fixed by contract to avoid expert valuation? No. Article 2348 requires the value to be determined on the day of the transfer by an expert appointed by agreement or by the court, the only exemption being the existence of an official quotation of the asset on a trading platform within the meaning of the Monetary and Financial Code. The text adds that any clause to the contrary is deemed unwritten. A lump-sum valuation, a cap or a waiver of expert valuation is therefore ineffective.

Does the forfeiture clause improve the creditor's ranking against other registered creditors? No. Ranking results from the enforceability of the security against third parties, by publicity or dispossession under Article 2337, and, between successive pledges without dispossession, from the order of registrations under Article 2340. The forfeiture clause accelerates the enforcement of security whose ranking already exists, it does not create it. An unpublished pledge with a forfeiture clause remains fragile as against third parties.

What becomes of the forfeiture clause in compulsory liquidation? The answer is debated. Article L. 641-3 of the French Commercial Code makes applicable to liquidation only the first and third paragraphs of I and III of Article L. 622-7, whereas the sentence prohibiting the forfeiture clause appears in I of that text, after the one concerning the unenforceability of the right of retention. The scope of the cross-reference depends on the division into paragraphs and on its interpretation. In practice, it is better not to base a strategy on this point and to use the court award organised by Article L. 642-20-1.

How long does a pledgee have to apply for court award in liquidation? Article L. 642-20-1 provides that, failing withdrawal of the pledge, the liquidator must apply to the supervising judge for authorisation to enforce within six months of the liquidation judgment, and then notify that authorisation to the creditor fifteen days before enforcement. The pledgee, even if not yet admitted, may apply to the supervising judge for court award before enforcement. If the claim is subsequently rejected, it returns the asset or its value, subject to the admitted amount.

Can a lender appropriate its debtor's main residence by means of a forfeiture clause? No. Article 2452 of the French Civil Code allows a forfeiture clause in the mortgage agreement, but specifies that this clause is without effect on property that constitutes the debtor's main residence. Article 2451 likewise excludes court award where the property constitutes the grantor's main residence. Note that the two texts do not refer to the same person, which can produce different results in security granted by a third party.

Is there an appropriation that withstands the opening of collective proceedings? Yes, within the field of financial collateral. Article L. 211-38 of the Monetary and Financial Code, in the version in force since 1 July 2026 resulting from Law No. 2025-391 of 30 April 2025, provides for transfers of full ownership and security interests capable of being enforced even where one of the parties is subject to one of the proceedings provided for by Book VI of the Commercial Code, enforcement taking place by set-off, appropriation or sale, without prior formal notice. The secured obligation must nevertheless fall within the scope of Article L. 211-36.